Poverty Refers To The Deficiency Phenomenon Economics Essay

Poverty refers to the lack phenomenon from assorted dimensions and involves pronounced want in wellbeing. It includes which people have nasty incomes and the inability to obtain the basic goods and services necessary for endurance with self-respect ( Sengupta, 2003 ) . Poverty besides include low degrees of instruction and wellness, hapless entree to clean H2O and sanitation, unequal physical security, deficiency of voice, and deficient capacity and chance to better one ‘s life ( World Bank,2000 ) . It has been critical societal job from the beginning of humanity and will be till the terminal of the universe but the rapid alteration in engineering took away the capableness of human attempt to cover his necessities entirely ( Demiral and Demiral, 1993 ) . Peoples must better their instruction to assist them to increase income and criterion of life.

Malaysia is one of the states with uninterrupted addition in economic growing since 1980s and therefore doing poorness worsening. Furthermore, poorness already gives impact a batch in footings of Malaysia ‘s economic growing and it measured by utilizing Poverty Line Income ( PLI ) . This has been the cardinal and chief aim of development from the Malayan authorities. In Malaysia, the poorness line is determined and measured in both absolute and comparative poorness. An absolute poorness line is calculated in footings of the income required to buy a minimal nutrient basket and other basic necessities like vesture. While comparative poorness in Malaysia is defined as the per capita family income degree that cuts off the bottom 40 % of the population. The poorness rate in Malaysia can be assessed and measured by separating absolute degree ‘s household income with income need the least good luck. Poverty line such as which states or reference in the Third Malaysia Plan take into history have to slightest nutrient and minimal demand like apparels, lodging, consumer lasting goods and cargo services ( Sulochana Nair,1993 ) .

Majority that comes within hapless extreme is Bumiputra race. They including those rusticate and in town and now increasing the figure of population. Those who defined as autochthonal people and Sarawak original people and Sabah ( indigens ) besides comes under this group. While trade Indian community, particularly those whose removed from a former country gum elastic estate is besides hapless utmost group. For Chinese community on the other manus, there are a figure of senior citizen that drop out and stray from traditional safety cyberspace. Classes idle that in normally taken attention of by societal scientific discipline organisations harmonizing to several idioms. Urban poorness is a phenomenon that frequently faces by metropoliss in the universe including in developed states like America and Japan. Rapid economic growing favoured with substructure development that is complete have made portion of metropoliss in Malaysia as cardinal human focal point. Therefore, town has become location to happen assorted chances and bask a hereafter that better. Harmonizing to Demiral and Demiral, ( 1993 ) , urban poorness has the disposition to go dense in certain countries with the consequence of globalisation procedure. It is chiefly due to unemployment, lower degrees of instruction, shorter life anticipations, income inequality and higher rates of population growing. Poverty in urban countries or urban poorness is sometimes considered as underclass poorness. Underclass muss is can be stated when the people do n’t hold a regular concern, ever dependant on the authorities assistance, with a higher possible offense and that has no shelter or takes shelter in bad fortunes ( Cheal, 1996 ) . Poverty in Malaysia has been conceptualized and stated as income poorness and measured utilizing a poorness line income to demarcate hapless and non-poor families. The phenomenon batch of cultural struggle originating from societal tensenesss spread by poorness, the altering dimensions of poorness and the outgrowth of new signifiers of poorness and lifting inequalities all require new attacks to poverty that will better the apprehension of the poorness job. Poverty obliteration attempts have to be evaluated and policies, schemes and plans have to be formulated to turn to a assortment of challenges that arise for poorness obliteration ( Sulochana Nair, 1993 ) .

Figure 1: Tendency of urban poorness in Malaya from twelvemonth 1981 to 2011.

The period from 1981 to 1988 clearly indicated that the rate of poorness in urban countries was instead high which peaked in 1984 at nine per centum. This was reflective of the planetary volatile economic state of affairs. In the early 1983 America began economic downswing. It took them a twosome of old ages to retrieve. Since America was a major importation state for many primary trade goods like gum elastic, oil thenar, wood and electronic merchandise, the lag of America economic system meant less export for many exporting developing states which earnestly affected their GDP. It was a multiplier consequence. Malaysia was one the states affected. Our export fell drastically. Many lost their occupation due to decelerate export demand and Malaysia ‘s economic system contracted. The period from 1989 to 2011 was declarative the robust economic recovery and growing. Attempts by the governments to spread out the state ‘s economic system had shown positive consequences. The authorities holistic attack to combat and eliminate poorness excessively had surely achieved its mark with the mean family poorness hovered somewhat more than one per centum.

In order to cut down poorness rate in Malaysia, the authorities launched and implement new policy with the manner redistribute income between cultural groups with a great accent on national integrity. The authorities formulated New Economic Policy the 20 twelvemonth ( NEP ) in 1970 as a chief policy to eliminate and battle poorness. This policy is seen purposes to further state constructing through eliminating poorness, economic restructuring and besides to acquire rid ethnicity designation with Malayan economic system map. ( SMP, 1971 ) . Beside that to cut down and eliminate poorness hereafter has to pay in disposal component that is good and societal development. Based on the economic index shows that, Malaysia was on path gotten developed state position toward the twelvemonth 2020 but to accomplish that mission, the authorities have to guarantee that able all Malaysians articulations and profiteering the development procedure. This policy can be successfully depends upon the appraisal of poorness line and definition of public assistance measuring as they affect the poorness measuring and policy execution ( Sen, 1976 ) . Therefore, it is of import to place and analyze which factors impacting urban poorness in Malaysia.

Problem Statement

Ever since Malaysia had gained independency from 1957 to 1960s Malaysia had experienced robust economic growing but top precedence was non given to battle poorness and increase the income degree and criterion of life of the hapless. Statistic had shown that earlier May 13 1969, the wealth of Malaysia was ain about 90 per centum by the Chinese, although the Chinese comprise about 40 per centum of the population of Malaysia. Many Malays particularly the urban hapless and those in the rural countries felt that they were marginalized in the mainstream of economic development. Many Malays argued that they had controlled the political way of Malayan political relations and hence particular attending should be given to them. Equally far as Chinese were concerned, they were etched in the economic system and economic development of Malaysia for decennaries. The economic and fiscal sectors were about controlled by the Chinese. Most of the concern were run and controlled by the kins and organisations which made it impossible for non Chinese to perforate. That was the scenario the Malays saw prior to May 13 1969 incident. As for the Indian, they were chiefly based and associated with gum elastic estates. Since their Numberss were little and non a force to be reckoned with, their voices were non heard. The Malays in urban countries particularly those non employed in public sector were engaged in little clip trading, working as labourers and making humble occupations. A great bulk of them were from rural countries looking for chances. This was due to force factor since they could non prolong their life in rural countries. Because of their low income, homesteader countries and societal jobs surfaced, while those in the rural countries maintained their lifestyle below the poorness line. Since the Malaysia had gained independency, many educated Malays were of the sentiment, that rapid economic growing which Malaysia had enjoyed did non reflect the existent per capita income of the Malays, as many Malays lived below the poorness line. Many Malays particularly in rural countries felt, they were denied proper instruction as secondary schools found in town. All these dissatisfactions and disparities were similar bombshells to be exploded. Indeed it exploded on May13 1969.May 13 1969 incident had resulted in the intuition of parliament. Malaysia was administered by National Action Council ( MAGERAN ) which had tasked a particular commission to analyze the cause of the public violence. The determination had specifically spelled the satisfaction of the Bumiputera in many countries. The study had resulted in the preparation of the New Economy Policy which among others for the authorities which are to battle and eliminate poorness irrespective of race and faith, to reconstitute society and to prolong the security of Malaysia. Equally far as poorness was concerned, it was associated and prevailing with the Malays. The authorities was holistic in its attack in reconstituting society no longer with the Chinese entirely be associated as concern, enterprisers and professional, the Malays as fisherman and husbandmans and the Indian as a estates worker, The most blazing determination from the New Economic Policy was 30 per centum of economic system of Malaysia was targeted for the Malays. As a consequence of the authorities accent on secondary and third instruction for Bumiputera, many Bumiputera professionals and enterprisers were born. Hence they were on par with their Chinese friend to take part in the mainstream of Malaysia economic system although the authorities failed to recognize the 30 per centum mark of Bumiputera participated. Studies had indicated many new coevals of Bumiputera whether educated, less educated or nonreaders had migrated to urban countries because of occupation chances as most of the state economic activities were centered in urban countries. Not all succeeded in trailing their dreams due to many factors like deficiency of accomplishment, instruction and chances. Naturally they belong to the lower income bracket. Besides the intensifying cost of life in urban countries had forced them to populate below the poorness line. Many rural migrators excessively were idle. This had resulted for other societal jobs like unemployment and population growing in urban countries which led to rising prices. The research worker attended to place factors and variable that had contributed to urban hapless.

Research Question

There are few research inquiries to be answered in this paper. The end is to happen replies for these peculiar inquiries so that this research achieves it goals. This survey will turn to the undermentioned issues:

Are unemployment, rising prices and instruction the chief factors lending to urban poorness in Malaysia?

How serious have these factors contributed to urban poorness in Malaysia?

Is the policy implemented truly effectual in cut downing the incidence of urban poorness in Malaysia?

Scope of survey

This survey focuses on the factors impacting urban poorness in Malaysia.The range of this survey is done at the national degree. The informations used in this survey is one-year informations which were obtained from the Malaysia Department of statistic, Economic Planning Unit, World Bank Data, Nation Master, and Bank Negara Malaysia. The sample size of this survey is 31 old ages which range from twelvemonth 1981 to 2011.

ThisA study’sA chief objectiveA was toA identifyA andA understand theA factors impacting urban poorness in MalaysiaA which is based on clip series informations on unemployment and rising prices from the World Bank and instruction from Ministry of Education Malaysia. This paper is organized as follows. Chapter 1 will supply the debut towards the subject of the survey. Chapter 2 is the reappraisal of related literature on the factor impacting towards urban poorness in Malaysia. Secondary information aggregation, techniques and process for analysis of informations is described in Chapter 3. Chapter 4 presents the item findings from the analysis and reading of informations. Reasoning comments and recommendation are presented in Chapter 5.


The aim of this survey is to by and large analyze the factors impacting urban poorness in Malaysia by taking in unemployment, rising prices and instruction as the explanatory variable. To make so, the aim has been determined as follows:

To place the relationship between the explanatory variable which are unemployment, rising prices and instruction towards urban poorness in Malaysia.

The chief aim of this survey was to analyze the relationship between a positive or negative that exist between unemployment, rising prices and instruction.

To reexamine whether there is a important relationship between independent variable and dependent variable in finding the incidence of urban poorness in Malaysia.

The 2nd aim of this research is to reexamine the important relationship between independent variables which are unemployment, rising prices and instruction of urban poorness in Malaysia.

To urge the appropriate policies and actions to be undertaken to cut down urban poorness in Malaysia.

Finally, the aim of this survey is to happen out what policies and action to be implemented to turn to the job of urban poorness in Malaysia.

Significance Of Study

Poverty obliteration and decrease dramas an of import function in accomplishing higher economic growing. By analyzing the factors impacting urban poorness in Malaysia help us to better understand the tendencies and factor of poorness that will ensue in poorness and besides assist the authorities to implement some of policies that would eliminate and battle poorness in the hereafter. The survey has important impacts and benefit to several parties such as research worker, pupil, public and the authorities.

Research worker

Supply the research worker with better apprehension and deep cognition sing urban poorness in Malaysia every bit good as they will come out with better thoughts and job work outing methods.


The pupil will acquire more information and better understanding about urban poorness in Malaysia. So they can utilize this information in this survey as their mention.


The populace or society will besides profit as this survey explicating factors impacting urban poorness in Malaysia. It shows how the unemployment, rising prices and instruction affect the poorness in urban countries.


The consequence of the research can demo the factors contribute to the urban poorness in Malaysia. Thus, the authorities can utilize the consequences from this research as a guideline in policy devising so that it can be a utile to implement for combat and eradicate poorness in urban countries.


Handiness of Datas

There are some informations that are still unavailable of unpublished by any section through their web site. Beside that the informations that available in the cyberspace are different in the unit of measuring.

Limited Sample Size of Times Series Data

This is the major and large job of research worker have to confront where most of available informations on the cyberspace are limited in clip scope and non plenty for 31 times series of informations.

Budget and clip restraints

The research worker has to apportion some budgets to travel straight to Putrajaya to obtain the information. Beside that spend more times to seek the relevant and suited informations at that place because there are some informations are still unpolished in the cyberspace through the official web site for illustration Department of Statistic Malaysia ( DOSM ) and Malaysia Economic Planning Unit ( EPU ) .


Hypothesis 1:

H0: There is no important relationship between unemployment ( UNP ) and poorness ( POV ) .

H1: There is a important relationship between unemployment ( UNP ) and poorness ( POV ) .

Hypothesis 2:

H0: There is no important relationship between rising prices ( IN ) and poorness ( POV ) .

H1: There is a important relationship between rising prices ( IN ) and poorness ( POV

Hypothesis 3:

H0: There is no important relationship between instruction ( EDU ) and poorness ( POV ) . ) .

H1: There is a important relationship between instruction ( EDU ) and poorness ( POV

Definition Of Footings


Poverty can be defined as the deficiency of income needed to get the minimal necessities of life and those who lack the resources to prolong life are considered as hapless.


UnemploymentA or joblessness can be defined by the International Labour Organization occurs when people are without jobsA and they have actively sought workA within the past four hebdomads.


Inflation refers to the addition in the general monetary value degree of goods and services to an economic system over clip. Inflation is the 1 of the chief index of the economic system.


Education is a procedure to organize a virtuous person. Furthermore instruction is forming attempts to increase the cognition of natural cognition that he had, in order to populate a utile and safe once more. Education is one of the most of import facets in any one state and is capable of transforming the state into a better place in footings of increased economic, cultural, political, societal, etc.

Chapter 2


2.1 Introduction

Harmonizing to Todaro ( 1997 ) states that poorness affecting two cardinal facets viz. economic system and societal facet. Social instability become a ground to economic biasness while economic biasness on the other manus aid make societal instability. Poverty involves marked want in wellbeing and comprises in many factors such as includes low incomes and ability to obtain the basic necessities for endurance with self-respect. Poverty besides affects the growing of Malaysia economic and it is measured utilizing a Poverty Line Income ( PLI ) . The current Malaysia ‘s poorness line stands at RM763 a month ( EPU, 2011 ) . This has been the cardinal aim of development for the Malayan authorities. The poorness line is usually can be defined as either the income or the outgo necessary for fulfilling the basic nutrient and non-food demands. A family whose monthly income is less than half of the official Poverty Line Income ( PLI ) is considered as hardcore hapless. Harmonizing to Ravallion ( 1998 ) interpreted poverty line as a degree on the consumer ‘s outgo map which gives the lowest cost to a family at a given degree of public-service corporation at the prevailing monetary values and for given family features. Urban poorness is caused by a battalion of causes and which profoundly rooted in political constructions and societal economic of the urban countries and are often linked to societal political and economic alterations at a regional, national and international degree. The response of urban family to increasing monetary values or worsening incomes in order to combat and eradicate poorness can hold negative effects like increasing work load of members of family, addition in the strength of usage of child labor at the disbursal of instruction harlotry and other societal ailments. Beside that, dislocation of support webs and break-up of household units to enable its members to take advantage of higher income gaining chances, increasing degrees of emphasis, force and struggles ( Sulochana Nair,1993 ) .The authorities formulated its 20-year New Economic Policy ( NEP ) in 1970 as a nucleus policy to eliminate and battle poorness. It aimed and at furthering nation-building through eliminating poorness and economic restructuring, so as to extinguish the designation of ethnicity with economic map ( SMP, 1971 ) .

Poverty and Unemployment

Harmonizing to Chamhuri Siwar and Mohd Yusof Kasim ( 1997 ) indicated that among the non-poor, there are besides the unemployed ( 23 per cent ) , laborers ( 18 per cent ) , freelance ( 23 per centum ) , authorities employees ( 11 per centum ) and private sector employees ( 20 per cent ) . The engagement rates of the really hapless and hapless in most classs of employment do non differ significantly from the non-poor. The unemployed between the really hapless, hapless and non-poor are chiefly the old aged, pensionaries and those having spiritual aid among caputs of families. One of the factors impacting the unemployment is the denationalization patterns that come into the docket with the attempts to minimise authorities harmonizing to the neo-liberal programmes. The attempt of the private sector to increase the efficiency with less work affects the unemployment job straight and indirectly. To dismember the production advancement and transport it to the countries where the work force is cheaper become a large job for the western states where the labour force is rather more expensive. As Goldsmith ( 1996 ) says in order to vie and same degree with Asia, Europe has to utilize less work forces, advanced engineering and that means more unemployment in the center and long term in Europe. New urban poorness is exhibited peculiarly in lodging market. The new urban autochthonal which does non hold homesteaders with one or two suites as in the past and complication in happening a land, legal limitations and homesteader landlords commanding the whole land make it impossible and troubles to acquire for the new urbanites to hold a place. Harmonizing to Sassen ( 1994 ) long tally unemployment in the metropoliss strengthens the deal state of affairs of the employer and makes the most deprived groups in the labour market to accept the fringy and leery work. Instability and unbalanced in the polarisation with work life of work possibilities besides addition of informal work due the new societal division. The alteration in new urban poorness and public assistance province are related because public assistance province is thought to be the largest investor and employer. The welfare authorities crises weakened the employer place of the populace sector and the unemployment increased. Harmonizing to Blank and Blinder ( 1986 ) examined the relationship between unemployment, rising prices, and official income poorness rates for households and individuals. Their arrested development findings show that rising prices and unemployment rates were both positively correlated to the per centum of all individuals populating in poorness during the 1959-1983 periods. However, while rising prices was associated with an addition in the steady-state poorness rate, this was lone consequence one-seventh the magnitude of the poverty-increasing consequence of a rise in the unemployment rate. This led Blank and Blinder conclude that while both unemployment and rising prices worsen poorness, the empirical grounds supports their belief that “ unemployment, non rising prices, is the rough revenue enhancement. A strong, robust, positive relationship between poorness and unemployment has been systematically observed. Harmonizing to Meyer and Sullivan ( 2011 ) , Income poorness does non look to be more antiphonal utilizing national degree fluctuation, but for ingestion poorness is often more antiphonal to unemployment when utilizing regional fluctuation.

Poverty and Inflation

Inflation can be increase poorness in two ways. First the rising prices revenue enhancement can diminish disposable income. Second if nominal rewards raise less than the monetary value of goods consumed by pay earners, workers ‘ existent income will worsen ( Eliana, 1992 ) . Furthermore nutrient crisis may hold negative impacts on human development in four ways such as by increasing poorness and inequality, declining nutrition, cut downing use of instruction and wellness services, and depletion of the productive assets of the hapless ( Bhutta and Ahmad, 2008 ) while being a vulnerable category in the society, hapless are thrash because of no societal support webs ( Selim, 2009 ) . On the contrary hapless are highly limited in their options to protect and support themselves against rising prices. They are usually asset-poor, while most of their nest eggs are in the signifier of hard currency, which is eroded that protects the rich who hold existent assets ( Fisher and Modigliani, 1978 ) . Beside that Blank and Blinder ( 1986 ) examined the relationship between rising prices, unemployment, and official income poorness rates for households and individuals. Their arrested development findings indicate that rising prices and unemployment rates were both positively related to the per centum of all individuals populating in poorness during the 1959-1983period. However, while rising prices was associated with an rise in the steady-state poorness rate, this consequence was merely one-seventh the magnitude of the poverty-increasing consequence of a addition in the unemployment rate. This led Blank and Blinder conclude that the variable of unemployment and rising prices are worsen poorness. Evidence supports their belief that “ unemployment, non rising prices, is the rough revenue enhancement. ” ( Blank, 1993 ) besides found a important positive relationship between rising prices and poorness rates. In contrast, Cutler and Katz, ( 1991 ) and Mocan, ( 1995 ) reported a comparatively little negative relationship between rising prices and poorness. Harmonizing to Muhammad Irfan Chani, Zahid Pervaiz, Sajjad Ahmad Jan, Amjad Ali and Amatul R. Chaudhary ( 2011 ) their findings show that economic growing and investing have less impact and decreased poorness, while both the rising prices and trade openness have caused an addition in poorness in Pakistan.

Poverty and Education

Harmonizing to Onn ‘s ( 1989 ) their survey focuses on the province of urban poorness in four urban countries consisting Penang, Kuala Lumpur, Kota Bharu and Johor Bharu are stand foring four different parts of West Malaysia. He used 2,000 samples covering 100 locations, in the survey found out that unlike rural countries, the presence of poorness in the urban countries transcends ethnicity and the chief causes of urban poorness because low degree in instruction, deficiency of occupation chances, big household size, and deficiency of entree to societal installations. Harmonizing to Chamhuri Siwar and Mohd. Yusof Kasim ( 1997 ) about 28 per cent of respondents does n’t hold formal instruction, 39 per centum finished primary instruction and 32 per centum finished primary instruction. A larger per centum of the really hapless ( 53 per centum ) and hapless ( 43 per centum ) completed and finished their primary instruction, compared to the non-poor ( 37 per cent ) . Otherwise, the non-poor had a higher per centum finished their secondary instruction ( 34 per cent ) , compared to the really hapless ( 24 per centum ) and hapless ( 30 per cent ) . Research in Australia for illustration had established that higher productiveness related into higher per capita income and for Malaysia, this means that Malaysians as a whole would profit from higher criterions of instruction, wellness attention, and public public assistance. In the recent survey, Chou ( 2003 ) found that 42 per centum of Australian growing 383 between 1960 and 2000 is attributable to the rise in educational attainment. As such, in the Malayan position, it becomes serious to supervise and command the cost and affordability of instruction through clip to all groups of its population as the alumnus work force could anticipate to acquire higher earning capacity and income chances in the hereafter and contribute to the sustainable development of Malaysia. Although in the USA, the universe ‘s richest economic system, instruction is non chief precedence for national docket but merely 2nd precedence harmonizing to a recent study done ( Hart and Teeter, 2003 ) . Another research besides have showed that important relationship exists between parental income and type of school entered by pupils. In Malaysia, there merely 61 per centum of pupils who entered authorities schools come from families in the lowest income quartile and 26 per centum from this lowest quartile entered private school ( Economic Planning Unit ( EPU ) and The World Bank, 2007 ) . Based on the surveies of affordability of instruction, household income is one of the yardsticks used to mensurate affordability ( Centre for Policy Studies, 2005 ; Usher and Cervenan, 2005 ; Hill and Winston, 2006 ) . For this peculiar survey on Malaysia, the gross domestic merchandise ( GDP ) per capita is chosen as the step to compare with household income. Even though GDP per capita does non mensurate household income in really good but it has the benefit of being a recognized step of comparative national buying power that has been used in figure of surveies ( Usher and Cervenan, 2005 ) . Harmonizing to Hill and Winston ( 2006 ) in their research in the USA found that on mean households from all income groups spent merely 15 per centum of their household income for their kids ‘s higher instruction. The college tuition fees rose more easy than it did in recent old ages, but however outpaced rising prices. For pupil go toing a four-year university might costs between US $ 10,000 to $ 50,000 and for most households paying for the instruction of their kids has become a major and large disbursal ( Linda, 2005 ) . In a related survey on affordability of higher instruction in Colorado found that whilst higher instruction is low-cost to the pupils from their households form upper and in-between income group and it was non low-cost toward the lower income group. This survey investigates the relationship between family income and pupils admitted for private third instruction establishments in Malaysia. Usher and Cernevan ( 2005 ) in their survey of the affordability of third instruction of 16 states measured affordability of third instruction based on “ affordability to pay ” which is defined as instruction cost as a fraction of GDP per capita. Harmonizing to Imran Sharif Chaudhry, Shahnawaz Malik, Abo ul Hassan and Muhammad Zahir Faridi ( 2010 ) the university instruction give more impact the incidence of absolute poorness. It can concluded that university instruction can be categorized as a powerful tool for poorness reduction and maintaining an opposite relationship with the dependant variable which is poorness. As the consequence higher instruction additions, the degree of poorness lessenings in the state. This findings show the outlooks that poorness is extremely influenced by instruction. Local universities besides help developing states in bettering the accomplishments of human capital which finally become helpful to cut down poorness. University graduates which have the specialised accomplishments to gain a life and inculcate their sector of employment- whether in the private industry, the public sector or civil society-with the endeavor that underpins success. Geting cosmopolitan primary instruction is one of the millenary development ends, without the higher instruction would merely intend increasing the load of unskilled population on the economic system. Most of people consider university instruction a luxury for developing states. It is non a luxury but it is indispensable.

Chapter 3


3.1 Data Collection

Table 3.1: Datas Beginnings



Urban poorness in Malaysia ( POV )

Malaysia Economic Planning Unit

Unemployment Rate ( UNP )

World Bank

Inflation Rate ( IN )

World Bank

Education ( EDU )

Ministry of Education Malaysia

The survey uses the secondary informations that have been collected and published for public usage. The informations already exist through the web site and research worker does non hold to roll up from the primary beginnings. The secondary informations are obtained from the Department of Statistics ( DOSM ) , Malaysia Economic Planning Unit ( EPU ) , Ministry, Bank Negara Malaysia ( BNM ) , World Bank and Ministry of Education Malaysia.

InA making this survey, there have two informations beginning that ‘s available and achievingA throughA external dataA and internal data.A Internal data merely can be obtained and accessed within the UITM campus such as from the library at PTAR 2. However, external informations can be accessed through the cyberspace and published informations. The external beginnings of informations that are used in this research are from the Department of Statistics ( DOSM ) , Ministry of Education Malaysia ( MOE ) , Malaysia Economic Planning Unit ( EPU ) and World Bank. The internal beginnings of informations used are from the Data Stream from computing machine lab at PTAR 2 and PTAR aggregations such as Bank Negara Malaysia ( BNM ) monthly and one-year studies.

Sampling Technique

3.2.1 Sample Size

This survey will utilize the sample size of 31 based on clip series informations that is

collected and observed yearly from the twelvemonth 1981 to the twelvemonth 2011.

3.3 Theoretical Model

The independent variables that are included in this research theoretical model are expected to hold major influence and important relationship to the dependant variable. The diagram shows the dependent variables viz. urban poorness in Malaysia ( POV ) will be explain by the independent variables viz. the unemployment rate ( UNP ) , rising prices rate ( IN ) and instruction ( EDU ) .

Figure 2: Mugwump Variables and Dependent Variable Relationship.

Unemployment RATE ( UNP )


Inflation RATE ( IN )


Independent Variables Dependent Variable

3.4 Variables

3.4.1 Dependent Variable

The dependent variable of this survey is the urban poorness rate in Malaysia that

being survey from period of 1981-2011.

Independent Variables

There are three different variables that being survey. There are unemployment rates ( UNP ) , rising prices rate ( IN ) and highest instructions ( EDU ) are studied from period of 1981-2011.

3.5 Data Analysis Technique

Using the ordinary least square ( OLS ) method, the E-View provides statistical informations analysis, arrested development and prediction tools on the computing machine. The information had been collected so necessitate to be regressed in order to gauge the equation for the research worker to cognize the important relationship between the dependant variable and independent variables. The estimation equation can be drawn as follows:

Multiple Linear Regression Model:

Y = I± + I?1X1 + I?2X2 + I?3X3 +

Where ;

Y = Dependent variable which represent urban poorness rate in Malaya

I± = the changeless figure of equation

I? = Coefficient Beta value

X1 = Independent variable which represent unemployment rate

X2 = Independent variable which represent rising prices rate

X3 = Independent variable which represent instruction

= Mistake

3.6 Procedure

The equation can be regress by utilizing the OLS method. This can be done by utilizing the E-View 7 package. Therefore, it can demo the consequence of R-square, t-test, F-test and any other statistical consequences.

3.6.1 Coefficient of Determination ( R2 )

R2 is the ratio of the explained amount of squares to the entire amount of squares. It is used to prove how good the fitted arrested development line is. R2 besides used to mensurate goodness of tantrum that is adjusted for the figure of explanatory variables in the theoretical account. A value of R2 stopping point to one shows an first-class overall tantrum, whereas a value near nothing shows a failure of the estimated arrested development equation. A value of R2 that are more than 0.8 indicates high explanatory power of all independent variables towards the alteration in the dependant variable.

3.6.2 Adjusted R2

There is another measuring of coefficient of finding which is Adjusted R2. It measures the per centum of the fluctuation of the dependant variable around its mean which is besides explained by the arrested development equation, adjusted for grade of freedom. Adjusted R2 can be used to compare the tantrums of equation with the same dependant variable and different figure of independent variable.

3.6.3 t-test

The analysis of statistical trial ( T-test ) has been used to compare the existent difference between two agencies in relation to the fluctuation in the information. Correlation analysis is concern with the survey of the relation between two variables.

3.6.4 F-test

F-test is a normal hypothesis trial that is designed to cover with a void hypothesis that contains multiple hypotheses or individual hypotheses about a group of coefficient. To be short, it tests the joint hypotheses that involve more than one coefficient at a clip. It is used to prove whether the independent variables as a group are important or non in finding the dependant variable.

Multiple Regression Model Problems

This survey will later analyze and discourse the jobs that might happen in the theoretical account analysis. There are two ( 2 ) most common jobs that may originate which are:

3.7.1 Multicollinearity

Multicollinearity means there is a perfect or terrible additive relationship among some all explanatory variables. In other words, one of the independent variables is depending on other independent variable. Multicollinearity violates classical premise which specifies that no explanatory variable is a closely additive related to any other explanatory variables.

The clearest mark of multicollinearity is when R2 is really high and exceed 0.8 and F-test is significance but none of really few of the estimated coefficient are important from nothing ( undistinguished of t-test ) . On the other custodies, multicollinearity job besides can be detected by utilizing Variance Inflation Factor ( VIF ) . It is the methods of observing the badness of multicollinearity by looking at the extent to which a given explanatory variable can explicate by all the other explanatory variables in the equation. VIF is an index of how much multicollinearity has increased the discrepancy of estimated coefficient. When the VIF is higher and exceed the value of 5, the more terrible the effects of multicollinearity.


Autocorrelation or consecutive correlativity, defined as the correlativity between the mistake of a arrested development theoretical account and it is the misdemeanor of classical premise IV that different observations of the error term are uncorrelated with each other. Pure consecutive correlativity does non do prejudice in the coefficient estimates although the premise is violated. However, consecutive correlativity causes OLS to no longer be the minimal discrepancy calculator ( of all the additive indifferent calculators ) . It besides causes the OLS estimations to be biased, taking to undependable hypothesis testing.